Bartering Back In Style

Personal property can often be used as down payment or part down payment to buy Real Estate. Hypothetical Situation: Mr. & Mrs. Weaver want to purchase a new home in ABC Corporation’s Subdivision. This builder, as many others over the last few years, is over-stocked with already constructed homes.

The builder is asking $210,000 for the home that the Weavers would like to buy. He has a construction loan on the home (with his bank) for $170,000 that he needs to pay off when he sells the home. Because of the slow market, the construction loans on these unsold homes are quickly eating up the profits; therefore, the builder is motivated to sell these existing homes. The builder can be flexible to a point; however, he has to have cash to pay off the loan to the bank for each home he sells.

The Weavers really want the house but they have a problem. They have been pre-approved for a loan up to $190,000. The Weavers happen to own a very nice 22 foot fishing boat. The boat is in great shape and Mr. Weaver had it appraised at $20,000. It happens to be in the Winter time when the demand for boats is not too great. I has been said that the two happiest days in a boat owner’s life is the day they buy the boat and the day they get rid of it.

Mr. & Mrs. Weaver made an offer to purchase the new home with a loan of $190,000 cash to go to the builder plus their boat as $20,000 down payment. After a short consideration period the builder accepted the offer. Even the builder may not have need of a boat, but the deal gets the builder’s $170,000 loan paid off to the bank, plus he get $20,000 cash from the buyer’s loan. He can market the boat and probably sell it in the Spring to make some boat buyer’s FIRST happiest day.

Lesson Learned. When potential buyers are short on cash, they should look for other assets they may use as part or all of the cash requirement. It could be a boat, a car, an airplane, motorcycle, Jet Ski, etc. Afterall, this is nothing in the world but using barter to make transactions and the Barter System has been around a lot longer than money. The way our money is being devalued, more bartering may be in the Vogue.

These posts are the opinion of the author who is not engaged in rendering legal, accounting, or investment advice. If such advice is required or desired, the services of competent professional persons should be sought.